- EBITDA above pandemic peak
- Full year deficit reduced
- CEO Moulding flags revenue growth return
E-commerce company THG (THG), the owner of beauty sites Cult Beauty and Lookfantastic and the online sports nutrition brand Myprotein, reported significantly narrowed full year losses for 2023 as CEO Matthew Moulding hailed the firm’s return to revenue growth.
Shares in THG ticked 2% lower to 66.6p as investors focused on the red ink, yet the Manchester-based company sounded optimistic about the year ahead with revenue trends continuing to improve and the beauty business enjoying eye-catching momentum in the wake of last year’s strategic changes.
DEFICIT REDUCED
For the year ended 31 December 2023, THG’s pre-tax losses reduced from £549.7 million to £252 million as continuing revenue fell 2.8% year-on-year to £2.05 billion, reflecting the exit from several loss-making categories and geographies across the group.
However, THG highlighted its positive momentum heading into 2024 and said ‘decisive actions’ taken during 2022 and 2023 have provided a ‘solid foundation supporting further margin recovery’ to its medium-term adjusted EBITDA margin target of 9%.
THG Beauty and THG Nutrition prioritised higher margin sales, which led to reduced order volumes but with a stronger margin performance. Meanwhile THG Ingenuity, the group’s e-commerce engine, continues with its strategic re-positioning, focusing on higher value and higher margin clients.
Continuing adjusted EBITDA of £120.4 million was up the best part of 50% year-on-year and higher than previous guidance of ‘above £117 million’, while THG also achieved free cash flow breakeven last year.
WHAT DID THE CEO SAY?
Moulding commented: ‘In 2023, we made material progress against our strategic priorities, delivering significant profit growth following the support for our consumers through the cost-of-living crisis in 2022. This focus led to the group delivering record EBITDA after cash-adjusting items in 2023, higher than at the peak of the pandemic.’
He continued: ‘Having completed our recent infrastructure investment programme, the group is now delivering operating leverage. Our fulfilment network is becoming increasingly optimised through a combination of robotics automation, AI and the onboarding of new Ingenuity clients utilising existing capacity.
‘The return to group revenue growth in Q4 was especially pleasing, and this momentum has continued into 2024.’
WHY LIBERUM IS BULLISH
With a ‘buy’ rating and 220p price target on THG, Liberum Capital said the results ‘beat on the EBITDA line and the company is seeing improving trading momentum in all areas. Importantly free cash flow breakeven was achieved in full year 2023 and debt should fall from here as capex cycle has normalised.’
The broker insisted there are ‘more positive catalysts now than the last two years with many of the hard strategic decisions made and we can see the delivery across the group. With improved disclosure and continued steady delivery, there should be material upside from here.’
